Chinese Chess

Octavian Report: What is your view of Xi Jinping? How do you see his vision for China playing out?

Kevin Rudd: Xi Jinping has a deep ideological and psychological commitment to the Chinese Communist Party. It's partly because he's second-generation Chinese royalty. His father was a member of the Politburo and a revolutionary commander during the civil war against the Nationalists. So it's very much in his blood. He did not come up through that other stream of the Party, the technocratic stream. As a consequence, by reason of personal experience and his ideological worldview, for him the Party is not just a temporary device — it's actually in his view long-term and central to China's ability to become a great power in the world.

For him, cleaning up the Party through the anti-corruption campaign was fundamental. For him, further consolidating the power of the Party versus other voices within the country is consistent with his ideological vision (despite the natural resistance to that). He sees himself as being personally central to the Party's future — hence his own personal power consolidation as well.

He's not a guy to be trifled with, I say having met him several times. He's a politician's politician operating within a one-party state.

OR: Do you see a risk for China in this power consolidation going forward? What about his move away from the free market?

Rudd: Three things are happening under Xi Jinping's leadership. One's this consolidation of political power around the person who is President and General Secretary and Chairman of the military commission. He is not just first among equals: he is the undisputed head honcho.

On the economy, what we've seen — particularly since China's own domestic financial crisis of August 2015 — is a rapid slowdown, if you can use those terms together, in the pace of phase-two free market economic reform in China. There was a blueprint announced in 2013: they went some ways toward implementing it in 2014 and the first half of 2015. They then had a meltdown in equities markets and financial institutions in the summer of that year. The response from the political leadership was: You want us to further liberalize this economy? Given what we've just been through? Thank you very much; we're not about to do that. So there were a number of anchors thrown overboard to slow the pace of market-based economic reform.

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The third thing we've seen with Xi Jinping's leadership is a much more decisive and proactive view of China's role in the world. Rather than sticking to Deng Xiaoping's maxim — hide your strength, bide your time, never take the lead — as of 2014, Xi announced a new general doctrinal strategy, an activist Chinese foreign security policy of actually moving the status quo. Hence the Belt and Road Initiative, hence land reclamations in the South China Sea. Hence a new foreign policy activism in Latin America and Africa and in the councils of the multilateral system.

OR: Do you think that the U.S. and China are going to clash? If so, where?

Rudd: Conflict between the United States and China is by no means inevitable. It's up to the leadership of the two countries to decide what future they want together. And at present, we're in a fluid position. The United States has formally abandoned its 40-year-long doctrine of strategic engagement with China, proclaiming that it's failed, that China is not becoming more liberal economically or more liberal politically or more liberal internationally. It's actually heading in the reverse direction. Hence Trump's declaration, through Vice President Pence, of a new period of strategic competition.

The problem with all that is we are now in a period where we don't know what the rules of the game are. We knew what the rules of engagement were previously because the two countries had gotten used to each other after 40 years. But in this new period, we're starting to see friction everywhere, and in unplanned and unpredictable ways.

Take the blow-up in Port Moresby at the APEC Summit. APEC for the first time in its 30-year history did not agree on a communiqué because of the fundamental breakdown between the American and Chinese positions on the future of global trade.

Having said all that, it's not in the interest of either country to go to war. From China's perspective, they'd probably lose a conventional conflict. No one wins a nuclear conflict. The U.S. point of view is that the losses would be unacceptably high. Therefore, the danger here is not one of intentionality. The danger is conflict through miscalculation and escalation. And that's where there's now too many things gone wrong for people like me to feel comfortable.

OR: Do you see the focal point of conflict being North Korea? The South China Sea? Taiwan?

Rudd: The probabilities are likely in that order. In the South China Sea, America is changing its posture to challenge China more through freedom-of-navigation operations. China is responding with aggressive tactics on the high seas and in the air. So there's what I describe as a basic law of arithmetic probability which starts to kick in. If you've got too much metal kicking around a defined area of water and air space, sooner or later the bits of metal hit each other. That's what worries me.

On the North Korea question, it's all quiet on the western front. Too quiet. And if we end up with a false dawn in terms of the Korean denuclearization objective — which I suspect we might — then what I have always been most anxious about from the get-go, going back to the Singapore Summit, is what happens once diplomacy is seen to have failed. We're then into a much harder strategic terrain. Because in the meantime through Trump's diplomacy in Singapore and with Kim Jong-un, we've seen a complete normalization of the China-North Korea relationship. This was previously in the icebox. That's our second set of problematic contingencies.

The third continuing sleeper is Taiwan. China is determined to rein in Taiwan's strategic space. But at the same time, China is not ready yet to risk conflict across the Taiwan Straits because of the unacceptably high risk of American involvement and/or loss of life as a result of Taiwanese countermeasures.